Late last week, under pressure from banks and big business, Nepal Rastra Bank (NRB) Governor Maha Prasad Adhikari unveiled a new monetary policy.&nbsp;
The policy expands credit of banks and credit sector, relaxing several regulatory provisions. But the Rastra Bank is careful not to allow banks to resume reckless lending.&nbsp;
“A cautiously accommodative monetary policy,” is how Adhikari described it.
The private sector has welcomed the policy, and the NEPSE soared steeply into two circuit breaks on Sunday, the first trading day after the policy was announced. &nbsp;
NRB has set a target for credit expansion to 12.5%, up from 11.5% last year. Excluding the last two fiscal years, credit has expanded at an annual rate of 20% in the last three decades, against an economic growth rate of about 4%.&nbsp;
Read also:<a href="https://nepalitimes.com/news/despite-politics-nepal-s-stock-market-is-bullish"> Despite politics, Nepal’s stock market is bullish</a>, Santosh Pokharel and Sudyumna Dahal
This is proof that <a href="https://nepalitimes.com/opinion/nepals-care-economy">Nepal’s economy</a> has not benefited from private sector credit expansion.
NRB tried to ease interest on loans following the pandemic but revised it to slow credit expansion due to economic turbulence.&nbsp;
The IMF (International Monetary Fund) also blamed an anaemic economy on the post-pandemic monetary policy, and its effects linger. &nbsp;
NRB’s decision to signals that it wants to further reduce the lending rates of banks. However, Nepal’s banks and financial institutions at present are flush with cash, and do not need to borrow from the central bank.&nbsp;
The policy change therefore will not affect the market interest rate. The deposit collection rate, which is unchanged at 3%, will ensure that the interest rate on bank deposits will not go down.
<a href="https://nepalitimes.com/editorial/central-role-of-the-central-bank">The central bank </a>has chosen to make the monetary policy more liberal through regulatory arrangements rather than monetary instruments to ease the pressure on the capital funds of financial institutions.&nbsp;
The existing loan loss provision of 1.2% on good loans has been reduced to 1.1%, which is estimated to increase the profits of the banking and financial institutions by up to Rs5 billion.&nbsp;
Similarly, the regulatory retail portfolio limit has been increased to Rs25 million lessening the strain on bank capital and making it easier for them to provide loans.
In addition, the new policy includes concessions to the construction sector with struggling businesses after builders complained about being blacklisted for not paying billions owed to the government.&nbsp;
Contractors will not be blacklisted for bounced cheques. The deadline for the loan interest payment has also been extended till mid-December.&nbsp;
But while NRB says it will review existing credit notice and blacklisting directives, a no-penalty policy for dishonouring checks would increase the risk for businesses.&nbsp;
All this is proof that<a href="https://nepalitimes.com/news/democracy-s-sidekicks"> the new NC-UML coalition</a> is beholden to business. This week, the prime minister ordered NEA to resume electricity supply to industries which have not paid power bills worth millions.&nbsp;
NRB also stated that it would ease the current working capital loan guidance, as well as revise the working capital limit (short-term financing extended to businesses to cover its day-to-day expenses) for micro, domestic, small and medium enterprises.&nbsp;
Read also: <a href="https://nepalitimes.com/news/soaring-debt">Soaring Debt</a>, Ramesh Kumar
The bank also announced that Nepalis who had obtained<a href="https://nepalitimes.com/here-now/speaking-the-language-of-overseas-work"> overseas work</a> permits would be able to obtain loans without collateral, increasing the possibility for such people to borrow at a cheaper rate.&nbsp;
The IMF has also suggested that Nepal amend the 2002 Rastra Bank Act to guarantee its independence. It is neither theoretically nor morally appropriate for every change in government to interfere with NRB policies. &nbsp;
Under pressure from big business, Prime Minister Oli, as soon as he assumed office, made direct comments about changing the monetary policy to make it more flexible.&nbsp;
Governor Adhikari had no choice but to give in to that pressure, but he has been equally careful not to repeat the mistakes of the past. He opened the door to credit expansion through his first monetary policy as governor enabling borrowers to obtain billions in refinance and working capital loans.&nbsp;
Read also: <a href="https://nepalitimes.com/news/poor-cash-rich-nepal">Poor cash-rich Nepal</a>, Sonia Awale
Although he has increased the target for credit expansion, Adhikari has been more prudent than before.&nbsp;
The governor has emphasised that seeking economic growth through monetary policy will not work as long as jobs, investment, and productivity do not improve.
“Seeking short-term solutions through a flexible monetary policy poses a <a href="https://nepalitimes.com/editorial/state-sponsored-economic-crisis">challenge to achieving long-term economic stability</a>,” Adhikari said.&nbsp;
In recent years, Nepal’s government and the private sector have pushed for economic revival through monetary policy. But that has allowed real estate and share market speculators a free rein.&nbsp;
The positive impact of such directives have been short-lived, and point to structural problems with the economy.&nbsp;
Economic opportunities in the country are limited because little has been done to create jobs, increase production, and encourage investment — factors that would contribute directly to long-term economic stability.&nbsp;
More than 850,000<a href="https://nepalitimes.com/here-now/a-long-way-to-europe"> Nepali youth left the country for foreign employment</a> and further education in the past year alone.&nbsp;
The biggest problem in Nepal’s financial system is credit abuse. And although NRB has accepted this it has not done much to curb it. The new monetary policy therefore may be ‘flexible’, but does not fix the economy’s old problems.
Ramesh Kumar

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Monetary politics

<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/2022111413114/63722f869c7e80680e0c251ejpeg.jpg" alt="" width="800" height="466"/><figcaption>Nepal Rastra Bank Governor Maha Prasad Adhikari.</figcaption></figure>“We cannot allow the rich to get richer in Nepal. One corporate borrower received refinancing of Rs1.27 billion straight from state coffers, while Nepalis slid into poverty. Small businesses also suffered, but their loans are not being rescheduled.”That was none other than Nepal Rastra Bank (NRB) Governor Maha Prasad Adhikari in an unedited version of a talk show on Kantipur TV in 2020.Adhikari was sacked by Finance Minister Janardan Sharma earlier this year, and promptly reinstated by the Supreme Court. And it was scandal-ridden Sharma who had to himself resign this month.After the pandemic lockdowns hit in 2020, the NRB set in motion refinancing procedures to keep the economy afloat, disbursing Rs158 billion by mid-December last year. This was like printing new money, but there was no evidence that the cash bailouts helped prop up the economy.In his interview, Governor Adhikari was admitting that there are business entities in Nepal that are ‘too big to fail’, and that the central bank’s refinancing policy was being misused by corporates with political patronage.Read also: <a href="https://www.nepalitimes.com/banner/state-sponsored-economic-crisis-2/">State-sponsored economic crisis</a>, Ramesh KumarThe result is that instead of keeping businesses afloat during the pandemic, selective refinancing has driven up inflation, increased imports, and upped the value of private assets.Nepal’s budgets have always been populist, no matter the government of the day, but the monetary policy of central banks across the world are necessarily conservative because of the need to keep inflation in check.The role of a central bank like the NRB is to control inflation, maintain the external balance of payments, and the stability of the financial sector. But the NRB’s credit expansion policy has done the opposite by rescuing those who were never impacted by the pandemic at all.The NRB in fact massively expanded cheap loans in the past two years to jump-start the economy. This only served to increase the import and inflation. Indeed, loans of banks and financial institutions, which stood at Rs3.21 trillion in 2020, have now surpassed Rs4.7 trillion. There has been no commensurate growth in employment and manufacturing capacity.It could be that there was too much interference on NRB policy by politicians on behalf of their cronies, but at the end of the day if the central bank had taken a more restrained approach, Nepal’s trade and balance of payments deficits would not have been as high as it is now, and foreign exchange reserves would not have depleted as fast.Read also: <a href="https://www.nepalitimes.com/editorial/how-not-to-be-a-sri-lanka/" target="_blank" rel="noopener noreferrer">How not to be a Sri Lanka</a>, EditorialMoreover, a sharp rise in real estate and share prices aided by a 5% interest rate in refinancing, increased investment, availability of repo loans and permanent liquidity facilities has unfairly benefited only the top tier of Nepali businessmen, industrialists, as well as media tycoons.The credit inflow actually increased imports, as the country rebounded from the pandemic. Moreover, a study by economist Biswas Gauchan showed that a 1% increase in private sector credit increased inflation by 0.31% and imports by 0.7%.Nepal has registered an 8% annual increase in inflation over the last 40 years. The income of Nepalis may have increased, but it has been absorbed by soaring prices. This means it is the general public that is bearing the brunt even as a chosen few big businesses reap huge benefits from politically-motivated credit outlay in the guise of a pandemic rescue package.NRB officials blame the failure of their monetary policies on the fixed INR-NPR exchange rate, and say this puts Nepal at a disadvantage every time the Indian rupee weakens against the US dollar.But this alone does not absolve the central bank, which has (for whatever reason) been reluctant to adopt stricter monetary measures to control import and inflation.Read also: <a href="https://www.nepalitimes.com/opinion/how-nepal-can-avert-an-economic-crunch/">How Nepal can avert an economic crunch</a>, Kalpana KhanalEven as Nepal’s economic crisis deepens, businesses paradoxically continue to pressure banks for cheap loans so they can keep their profit margins.The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) on Sunday demanded the continuation of concessional loans extended during the pandemic. However, it is not the central bank’s job to save businessmen from a debt trap of their own making.It is much more important to save the country’s economy from shrinking forex reserves, widening trade deficit, and inflation.Governor Adhikari must know why the misuse of bank credit by those with political patronage has hurt the economy. Awareness of a problem is the first step in solving it.Read also: <a href="https://www.nepalitimes.com/here-now/economy-in-trouble-but-no-need-not-to-panic-yet/">“Economy in trouble but no need to panic yet”</a>, Nepali TimesRamesh Kumar

Central role of the Central Bank

<img width="1500" height="1000" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221114111128/637218689c7e80680e0baa3ejpeg.jpg" alt=""/>In March, the World Bank approved a $150 million <a href="https://www.worldbank.org/en/news/press-release/2022/05/03/government-of-nepal-and-world-bank-sign-150-million-development-policy-credit-to-strengthen-nepal-s-financial-sector" target="_blank" rel="noopener noreferrer">‘Finance for Growth’ credit line</a> to strengthen Nepal’s financial sector for green, resilient, and inclusive development. However, critics say lack of money has never been the issue for the country to make a <a href="https://www.nepalitimes.com/opinion/nepal-can-lead-in-zero-carbon/" target="_blank" rel="noopener noreferrer">transition to renewable energy</a>, it is the dearth of political will. The Finance for Growth loan package kicks off a new climate agenda for Nepal by promoting climate finance resilience policies in banking, insurance, and capital markets, which lay the groundwork for the adoption of green loan incentives and new insurance and capital market products that are tailored to meet climate challenges.  It also hopes to improve supervision of the banking sector to address financial stability risks in the context of the pandemic, foster financial product innovations through opening up capital, insurance, and disaster risk financing markets, and increase liquidity and inclusion through access to external commercial borrowing, financial literacy, and financial digitalisation.  “This credit creates a strong foundation for a more stable, less bank-centric and more inclusive financial sector that is better positioned to mobilise private investment and support real economic activity,” says Peter Mousley, the World Bank task team leader for the project.  Indeed,<a href="https://www.nepalitimes.com/latest/turning-green-policies-into-greenbacks/" target="_blank" rel="noopener noreferrer"> green banks</a> have the potential to reduce financing risks, finance underserved markets, attract foreign investment, fulfill national renewable energy targets, and help to fulfill carbon reduction commitments. But to fully tap into the potential of green financing, both public and private sectors will have to make efforts.  Nepal Rastra Bank (NRB) has been the key driver behind spurring sustainable finance in the country. In a recent report by the IFC-facilitated Sustainable Banking Network (SBN) titled<a href="https://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/sustainability-at-ifc/publications/publications_report_sbnnecessaryambition" target="_blank" rel="noopener noreferrer"> Necessary Ambition: How Low-Income Countries Are Adopting Sustainable Finance to Address Poverty, Climate Change, and Other Urgent Challenges</a>, green finance has been identified as a top priority in Nepal’s financial sector.  NRB launched the first policy document in 2018 <a href="https://www.nrb.org.np/contents/uploads/2019/12/Guidelines-Guideline_on_Environmental__Social_Risk_Management_for_Banks_and_Financial_Institutions_2018-new.pdf" target="_blank" rel="noopener noreferrer">Guideline on Environmental and Social Risk Management (ESRM)</a> for Banks and Financial Institutions . which marked Nepal’s sustainable finance policy implementation, which has since progressed from ‘formulating’ under the ‘preparation’ stage to ‘developing’ under the ‘implementation’ stage (See chart).  <figure><img width="1124" height="815" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221114111128/6372186b9c7e80680e0baa3fjpeg.jpg" alt=""><figcaption> </figcaption></figure>In 2020, NRB issued a Unified Directive to require all banks and financial institutions to integrate environmental and social risk management into their overall credit risk management process as well as policymaking.  Furthermore, the Netherlands Development Finance Company (FMO), has been collaborating with NMB Bank to work in renewable energy, hydropower, and green project financing. It is providing loans and equity investment for the Environmental and Social Management System (ESMS), and by doing so it will likely invite more equity investments in small and medium enterprises (SME).  Moreover, by providing credit to SME clients instead of big corporations, FMO  supports equity investments in private equity funds such as Dolma Impact Fund I and II. Companies such as Nepal Invests aim to attract more capital from Development Finance Institution (DFI) to the Nepal financial system. However, to be eligible for loans by DFIs, ESMS is often a prerequisite. Nepal Invests is helping other banks to meet that necessary condition.  SMEs have been a crucial player in Nepal’s growth, making up about 20% of GDP and accounting for over 60% of employment opportunities in the country. In 2020, IFC provided a $25 million loan to NMB to help finance green projects and SMEs. This investment will expand NMB’s SME portfolio to over $1 billion by 2025 and generate 50,000 more jobs. The quantity of loans available to SMEs from NMB is expected to double as a result of the project. “The chances of receiving funding will be exponential if SMEs are in sync with international best practices such as environmental, social and governance measures, we have demonstrated that risk capital can help mitigate climate change,” says says Siddhant Raj Pandey, CEO of Business Oxygen (Bo2), Nepal's first international Private Equity Impact and Climate Related Fund. “To have an inclusive model, climate-smart approaches and transparent operations are critical to the success of companies.” The critical next step for Nepal’s green finance will be expanding the adoption of the <a href="https://www.nrb.org.np/contents/uploads/2019/12/Guidelines-Guideline_on_Environmental__Social_Risk_Management_for_Banks_and_Financial_Institutions_2018-new.pdf" target="_blank" rel="noopener noreferrer">Environmental and Social Risk Management (ESRM) Guideline</a> to other banks across the country. Building the capacity of regulators and financial institutions, strengthening implementation coordination, and developing a taxonomy of green and socially inclusive initiatives are among the central bank's top priorities. These would provide a favorable and enabling environment for sustainable finance and open up green finance projects.  But for the private sector to invest in renewables and include green finance in their agenda, the government needs to provide them with incentives. For example, the other renewable energy sectors should get the same favorable treatment such as tax breaks much like hydropower. Private players such as Multilateral Development Banks (MDBs), industry associations, and local financial institutions can tap into the field.  Green banking has got a strong start in the public sector, but private parties are lagging behind and they should get on board to secure a better and safer financial system. Since private equity and venture capital are still relatively new concepts in Nepal, the role of the Nepal Private Equity Association (NPEA) become crucial in providing the ecosystem for a lobbying platform. Business Oxygen, a climate-focused fund with investments from the IFC, Climate Investment Funds, and the FCDO, has been investing in and promoting climate-smart approaches. The firm measures investment’s success not only through impact numbers on the financial statements but also metrics in accordance with the UN’s Sustainable Development Goals.  It has a separate fund dedicated to providing technical support to companies whose financials are not able to comply with environmental, social and governance measures. ESG compliance monitoring is essential to the investment decision-making process. “Impact is an intentionality of our investment not just a by-product,” says Pandey of Bo2.   However, as a foreign direct investment (FDI) company, there are many policy and regulation challenges. Early on, Bo2 had a good pipeline of companies in the agricultural sector, but they were discontinued due to the <a href="https://www.lawcommission.gov.np/en/wp-content/uploads/2019/09/The-Foreign-Investment-and-Technology-Transfer-Act-2019-2075.pdf" target="_blank" rel="noopener noreferrer">Foreign Investment and Technology Transfer Act (FITTA)</a> which prohibited FDI investment in agriculture. Later, the government raised the investment threshold limit from Rs5 million to Rs50 million which forced SME investors to diversify their strategies.  One area where Nepal is continuously and successfully bringing in investment is the green hydro project with experience of over 20 years. Investor trust is built upon sufficient human resources and a proper supply chain of equipment including turbines and hydro, mechanical and electromechanical machinery required.  “Even very risky hydro projects can still receive 70% of debt financing from local banks here in Nepal,” says Kushal Gurung, CEO of Windpower Nepal, adding that hydro projects are easily financed under an established ecosystem and intact supply chain.  But this is not the case for other green projects such as wind and solar where debt financing remains a challenge. The lack of trust from banks stems from a much shorter track record and low confidence in the revenue model.  But the good news is that such green projects need much lower investment. This allows private investors to come in and provide equity financing. “A solar project can be entirely financed by private equity investment with zero debt financing unlike hydropower where the opposite is true,” adds Gurung.  The climate crisis has added to problems like water availability, spatial-temporal distribution, and alteration in the hydrological cycle have been altered. Last year, Nepal’s electricity generation declined by 6.9% and this is expected to get worse, especially in the dry season. <a href="https://npc.gov.np/images/category/15th_plan_English_Version.pdf">Nepal’s 15th Five Year Plan (2019-2024)</a> has set a key target to achieve a 12% share of renewable energy in overall energy consumption. In 2022, it is a mere 3.27%.  An energy resilient Nepal needs effective collaboration between public and private entities. Public financing is insufficient but by greening the system with government subsidies, will save both the ecology and economy.Angel Li is a student at Pitzer College in California. Read Also: <a href="https://www.nepalitimes.com/opinion/nepal-can-lead-in-zero-carbon/" target="_blank" rel="noopener noreferrer">Nepal can lead in zero-carbon, </a>Nicola Pollitt <a href="https://www.nepalitimes.com/latest/turning-green-policies-into-greenbacks/" target="_blank" rel="noopener noreferrer">Turning green policies into greenbacks</a>, Rastraraj Bhandari

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Green is the colour of money and nature

<img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221110161152/636d1e4d9c7e80680e0af401jpeg.jpg" alt="" width="750" height="463"/>Latest Rastra Bank figures show that Nepal's foreign currency reserves continued to plummet in the past month, while the trade gap widened.  Hard currency reserves fell by $510 million to $10.47 billion in one month -- this is equivalent to only six months of imports. The falling reserve is affecting imports, and indirectly government revenue from tax. Nepal's trade deficit increased to Rs150.3 billion in October-November, doubling from Rs73.1 billion the previous month. Remittance from Nepali workers abroad declined by 7.6% to Rs312.14billion in October-November, and had fallen by the same amount the previous month. So far this fiscal year, Nepal exported only Rs6.5 billion worth of goods, while its imports have gone up to Rs82.1 billion.

Economic downturn

<img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221108101128/636a21709c7e80680e04173ejpeg.jpg" alt="" width="730" height="886"/>In 1991, India’s foreign exchange reserves almost emptied when the country’s balance of payments collapsed. The Central Bank eventually averted a full-blown crisis, but poverty in India increased in the years that followed. Manmohan Singh was finance minister, and he introduced dramatic economic reforms that unleashed India’s economy and has been the foundation of its growth.Today, Nepal is at the risk of facing the same crisis India experienced three decades ago. There is a net outflow of foreign exchange, as remittance income fails to keep pace with the growth in <a style="background-color: #ffffff; font-size: 15px; letter-spacing: 0.01em;" href="https://www.nepalitimes.com/banner/from-a-fossil-past-to-an-electric-future/" target="_blank" rel="noopener">imports, mainly petroleum. </a>Nepal’s foreign exchange reserves currently can sustain only 7 months and 26 days of imports, compared to 14 months and 3 days as recently as 2016. (See graph above) Nepal Rastra Bank also calculated that in the first four months of the fiscal year, Nepal’s balance of payments deficit stood at Rs57 billion and in just the last month it increased by Rs22 billion.“The current rate of increase in the balance of payments deficit will be a huge crisis in the future,” warns Bijaya Nath Bhattarai, an ex-governor of Nepal Rastra bank.Read also : <a href="http://archive.nepalitimes.com/news.php?id=18194#.XC73rFUzbIU" target="_blank" rel="noopener">Hydrocratic dreams</a>, Ratna Sansar Shrestha Nepal’s over-dependence on <a href="https://www.nepalitimes.com/banner/kleptocrats-of-kathmandu-and-kualalampur/" target="_blank" rel="noopener">remittance </a>is deepening the crisis. Among different sources of foreign exchange for a country such as investments, exports, or tourism, remittances from overseas workers is the most unreliable income source because it can easily be affected by political tension and conflicts. Nepal’s remittance income is also not ploughed into productive sectors, and is mostly used up in paying for imported consumer goods and energy.Some 65% of Nepal’s total import bill is paid through remittances, while exports constitute only 6% and investment only 17% of Nepal’s annual foreign exchange income that is used to pay for imports. But even with all these sources combined, Nepal cannot meet 12% of its import bill, which is what is leading to the balance of payment deficit. The country has been forced to dip into its foreign exchange reserves to meet the gap.In the first four months of the current fiscal year, Nepal imported goods worth approximately Rs400 billion while exports were only worth Rs29 billion. Even though this is a tremendous difference, finance minister <a href="https://www.nepalitimes.com/banner/calendar-of-economic-change/" target="_blank" rel="noopener">Yuba Raj Khatiwada</a> admits that what worries him more is the gap in the service sector. Most of the current outflow is for energy and vehicle imports, while there is also a huge outflow due to <a href="https://www.nepalitimes.com/banner/migration-certificate/" target="_blank" rel="noopener">students</a>, medical patients and <a href="https://www.nepalitimes.com/banner/where-are-you-going-this-dasain/" target="_blank" rel="noopener">Nepalis vacationing abroad</a>. Nepali tourists spent Rs35 billion abroad in the four months of this fiscal year, but foreign tourists spent only Rs25 billion in Nepal during the same period.This deteriorating balance of payments deficit may compel the government to adopt a restrictive monetary policy, but economist Keshav Acharya explains that this will mean only two choices for the government: “Either the government must take foreign loans, or reduce imports to prevent the outflow of hard currency.”The easiest step would be to borrow, but ex-governor Bhattarai notes that adhering to the strict conditions of the donors might be very painful for Nepal as it has been for other countries. Moreover, the crisis may also lead to policies to stop Nepalis going abroad, and limit imports to only basic goods.The CEO of Nepal Rastra Bank Nar Bahadur Thapa says, “If the balance of payments deficit and growth of imports continues at the present rate, we may not be able to import even the goods needed for development projects.”It is accepted practice that an import-dependent country without a sustainable source of foreign currency needs to maintain foreign exchange reserves to handle at least six months of imports. But with Nepal’s total annual export meeting only 24 days of imports, Nepal Rastra Bank’s policy is to maintain foreign exchange reserves to last at least 8 months.If not, depleted reserves can put pressure on Nepali fixed <a href="https://www.nepalitimes.com/opinion/12-full-opinion/dollar-laxmi/" target="_blank" rel="noopener">exchange rate </a>with Indian currently at Rs160. If that happens, there will be ruinous capital flight to India, as has occurred in the past. Ex-governor Krishna Bahadur Mandandhar says that the government and the central bank still have time to remedy the situation by limiting imports of luxury items. But this could lead to an expansion in the black market.Earlier this year, when the government applied quantitative restrictions on the import of sugar, the price immediately shot up by Rs5 per kg. Worse, if there is a devaluation of the Nepali rupee it will raise inflation and that could lead the economy into a downward spiral.Experts advise that while the central bank needs to be free from political interference to stabilise the economy, the government and the central bank must coordinate their actions. In the longer-term, there is no other way but to attract investors by increasing the competitiveness of the Nepali economy and increase exports.

Nepal living beyond its means

<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221107171136/636934779c7e80680e03dff9jpeg.jpg" alt="" width="1400" height="1069"/><figcaption>Bhanu Bhattarai</figcaption></figure>Nepal’s banks have once more entered the dark tunnel of scarcity of loanable funds. Commercial banks have misinterpreted the monetary environment for three years in a row -- they lend aggressively during the first quarter, and run out of steam thereafter until the final quarter of the fiscal year.The seeds of the trouble were sown five years ago. As the IMF puts it in its most recent South Asia Regional Update, ‘Loose monetary conditions, along with a fourfold increase in banks’ paid-up capital in the two years to mid-2018 required by the Nepal Rastra Bank (NRB), have fueled a strong credit expansion. Private sector credit growth has averaged 22% (y/y) in the past two years, even as the NRB maintains ceilings on banks’ loan-to-deposit ratio and the loan-to-value ratio on car loans.’Nepal’s financial landscape is heavily skewed towards banking. According to a recent World Bank report, banks account for 87% of financial sector assets in Nepal. Private equity and venture capital space are still in nascent stages. The <a href="https://www.nepalitimes.com/banner/why-the-private-sector-is-spooked/" target="_blank" rel="noopener">private sector</a> thus largely depends on bank debts, and in their absence, businesses have had to postpone plans or slow down operations. This has resulted in increased cost or lost opportunities.Recurring <a href="https://www.nepalitimes.com/here-now/crunching-the-numbers-on-credit/" target="_blank" rel="noopener">credit crunches</a>, which last several months every year, have impacted the economy as a whole. Key responsible parties here are:<ul><li>Government of Nepal for its inability to spend on capital expenditures</li> 	<li>NRB for instigating the crisis and then offering regulatory forbearance that encourages banks to push prudential boundaries</li> 	<li>Banks which appear to be driven with the sole objective of servicing increased capital</li></ul>Nepal’s economic growth over past two decades has been largely led by the private sector, in spite of ineffective governments and inefficient bureaucracy. Banks should refrain from pointing fingers at NRB or the government. The NRB has not always been pro-active, its regulatory approach has often been ‘one step forward two steps back’. The government’s norm has always been to bulk up capital expenditure towards the end of the year. We want NRB and the government to be more responsive, but it will be a gradual process at best. And frankly, the banking business has thrived even in this environment, so let’s be reasonable.Read also: <a href="https://archive.nepalitimes.com/regular-columns/guest-editorial/banking-crisis-explained,1096" target="_blank" rel="noopener">Banking Crisis Explained</a>, Suman JoshiAs the most transparent sector of the economy, the onus is on the banks collectively to manage public perception and repair the community’s battered image. Here’s a list of items they need to consider:1. Anticipate better, and get your basics right. Will the market offer sufficient new deposits to fund growth in loan books? Nepal may be more stable politically, but with compromises from bureaucrats and politicians, it will be a while before their Key Performance Indicators align with Nepal’s aspirations for rapid economic growth. It is unrealistic, this early, to expect government spending to veer from tradition to follow a desired timeline that match banks’ need for new deposits.2. Who is winning that debate in the boardroom? Most banks appear to have adopted a strategy to grow lending books aggressively to meet shareholder expectations of return on equity. The impact of this on their lending behavior is worrisome. What is the quality of loan assets banks are booking when they are expanding at 22% while the economy grew at 3-4% annually over last few years? Also the continued contribution of banks to real estate buoyancy may someday come back to haunt them. Excessive reliance on real estate as collateral has affected a loan officer’s approach to lending. Under the current loan loss provisioning norms and multiple banking context, it is possible to keep masking bad loans, which raises doubts about quality of profits. The IMF has singled out this challenge and suggests: ‘Rapid credit growth underscores the need to accelerate banking sector reforms. Building on the recent amendments to the regulatory framework, loan classification, provisioning, and banks’ risk management practices should be upgraded.’3. Is it possible that many banks have bitten off more than they can chew by expanding their operations and branch network rapidly? Frequency of operational risk events suggests that quality of human resource and internal control mechanisms need significant improvement.Banks have finally acknowledged the need to adopt digital channels of delivery. Better late than never. Even so, there is little chance of sufficient investment happening here. It is not enough to link bank systems to a digital payment platform. A key driver for consumer uptake is a cultural shift within individual banks to champion digital banking services.Read also: <a href="https://www.nepalitimes.com/banner/nepals-budding-e-commerce-ecosystem/" target="_blank" rel="noopener">Nepal's budding e-commerce ecosystem</a>, Sikuma RaiClearly, Nepal is an over-banked economy with smaller banks struggling to stay relevant. Industry experts agree that there is a case for reduction in number of banks. Market prices are currently at interesting levels for more capable banks to consider acquiring other institutions. It may be easier said than done, but if there is an industry-wide resolve, the ducks will line up.Suman Joshi is a former banker and Founder and Chairman of True North Associates, a private equity firm.

Banks biting off more than they can chew?

https://www.youtube.com/watch?v=CwbKTUYxlh0The appointment by the Communist government of respected economist <a href="http://archive.nepalitimes.com/blogs/thebrief/2018/02/26/yuba-raj-khatiwadas-turn/">Yuba Raj Khatiwada</a> (pictured above) as Finance Minister earlier this year was seen by many as a masterstroke. People hoped this would create jobs, <a href="https://www.nepalitimes.com/latest/the-regulator-is-back-as-finance-minister/">maintain fiscal discipline</a> and deliver prosperity.Seven months later, <a href="https://www.nepalitimes.com/opinion/bottom-up-approach/">the euphoria</a> is rapidly evaporating as the trade imbalance worsens with imports ballooning, foreign exchange reserves shrink, and there are fears of another liquidity crisis. Prices of food, vegetables, fuel and other essentials have soared ahead of the Dasain-Tihar festivals.A Nepal Rastra Bank report warns that the economy faces strong headwind despite robust growth in remittances. Last week, the Asian Development Bank forecast that Nepal’s economic growth would be 4.9% this year. The World Bank put it even lower at 4.6%. To be sure, they usually factor in possible natural disasters, institutional limitations and other constraints to project minimum growth. The National Planning Commission’s projection is 7.2%.Khatiwada had introduced austerity measures, but his first budget plan was criticised by the opposition NC and independent economists as being laden with ‘doctored data’. Some MPs of his own party were also critical because it ignored electoral promises of more jobs, social security, big-ticket projects and an economic revolution.In his defence, Khatiwada says the government has spent most of its energy so far in developing organisational, legal and financial structures as well as managing resources. But even he admits it is now time to start delivering results.In an exclusive interview with Nepali Times this week Khatiwada said development will now be expedited because policy constraints are being removed. For example, the existing Public Procurement Act will now disqualify contractors who bid lower than minimum cost and delay completion. A new public company is being set up to rent out construction equipment for government projects. Private companies need not plant 25 trees for every tree felled, they just deposit a tree plantation fee which the government will use for reforestation.Khatiwada said: “I could have announced populist programs for short-term glory, but I gave priority to achieving long-term goals.”The WB Group is returning to hydropower investment with Upper Arun and Upper Trisuli, and the ADB has shown an interest in other projects like Dudhkosi. But Khatiwada says Nepal needs more investment to generate 15,000MW more electricity in 10 years, but Nepal’s banking sector is incapable of lending so much and donors will not pay for energy infrastructure.He says: “We have no option but to take foreign loans, but we will accept and use them wisely.”<h1 style="box-sizing: inherit; letter-spacing: 0.15px; white-space: normal;">“The West is even more ready than before to help Nepal”</h1><figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221107171112/63692eda9c7e80680e03c074jpeg.jpg" alt="" width="1400" height="1004"/><figcaption>Photo: Bikram Rai</figcaption></figure>Excerpts from an interview with Finance Minister Yuba Raj Khatiwada on Tuesday in which he played down rifts with Western donor agencies, or that Nepal did not want assistance for ‘soft’ sectors like human rights and democracy.Nepali Times: It has been seven months since you became Finance Minister, what are your tangible achievements so far?Yuba Raj Khatiwada: If you ask me how many more kilometers of road or railway lines have been laid or how much more electricity has been added to the national grid, we cannot claim to have achieved much. But what we all need to understand is that the process of implementing the Constitution began only after we came to power. We had to spend a lot of time in developing organisational, legal and financial structures of provincial and local governments. However, we have made significant progress in managing resources for mega infrastructure projects like roads, railways, airports and hydropower. We have laid the foundations, and we will now start delivering results.How about foreign aid?We have been able to convince bilateral and multilateral donors that our government will not waste foreign aid in populist programs for short-term gain. We will use it for long-term benefit. This is why the World Bank has agreed to provide more financial assistance to us, and other bilateral donors are also excited. We are looking for foreign assistance especially in infrastructure like roads, tunnels, railway and hydropower. We are receiving around Rs 300 billion in foreign assistance annually, but we want to increase this amount to Rs 500 billion next year. We will not be able to finance the annual budget just from tax revenue.But Western aid agencies are alarmed that the government is restricting them, and the shrinking democratic space in Nepal.They must be worried about the National Integrity Policy, but that is not a policy that was proposed or considered by our government. We are serious about good governance, and this is not just a responsibility of the government. Donors, INGOs and private sector must also contribute. We will take measures on good governance only after consulting them. They need not worry about it.Are you saying donors and I/NGOs are not transparent and accountable?We have proof that some of them have overstepped their mandates. It is the State’s duty to act against those who disrespect Nepal’s sovereignty, integrity and national interest.There is a sense that Nepal is now cosying up to India and China, but it is alienating its long-term Western development partners.I have heard this is the subject of talk over tea in some quarters. But I have found Western donors even more ready to help us. At the World Bank headquarters, I recently met the heads of USAID and the Millennium Challenge Corporation (MCC) who are happy that an elected government is in place and they have promised to increase their financial assistance. Switzerland and Germany are also ready to step up aid. The European Union is also saying this is the right time to increase support to Nepal. We may have opposing views on certain diplomatic issues, but Western donors are more willing than ever to help Nepal.What is your take on the <a href="https://www.nepalitimes.com/banner/does-nepal-need-a-4th-international-airport/">Nijgad airport</a> debate?There was a proposal that <a href="https://www.nepalitimes.com/here-now/economy-ecology-of-nijgad-airport/">Nijgad airport</a> will not be profitable by itself, so whichever company builds it must be given a large swathe of land to develop an aeropolis to make it more attractive. The government has now discarded this proposal. We are now committed to building just an airport causing minimum damage to the local ecology. We need two runways as per the original design, but we are now building just one runway. Adding the second runway will depend on the passenger volume. The Ministry of Finance and the Ministry of Tourism have agreed to involve the private sector in developing the airport. The revenue generated by cutting down trees in Nijgad will not be misused.Why is the government considering the same Chinese company for the 1200 MW <a href="http://archive.nepalitimes.com/blogs/thebrief/2017/08/06/building-budhigandaki/">Budigandaki hydroelectricity project</a> without calling for an open competition?The same company gets selected for some mega hydropower projects like Budi Gandaki irrespective of how many times an open bidding is called. This is what happened in Upper Karnali and Arun. Only a couple of other companies showed interest, but they were not qualified. That was just a waste of time. Budi Gandaki will be essentially built by us. We will dictate its design or financial management. The Chinese company will just help us get credit and construct the project. The real debate is about how high the Budigandaki dam should be for which we need a technical review.Our plan is to generate 15,000 MW more electricity in 10 years, and we require more than Rs 300 billion for this. We cannot finance these projects on our own, and our banking system does not have the capacity. Donors will not finance such projects, either. So we must seek foreign loans, as in Budi Gandaki. The challenge is to take and invest foreign loan as wisely as possible.<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221107171112/63692ede9c7e80680e03c075jpeg.jpg" alt="" width="1400" height="1050"><figcaption> </figcaption></figure>

Calendar of economic change

Architecture can be a powerful agent of change, shaping not just spaces but the way people live, connect, and experience the world.&nbsp; For Nepal, which is <a href="https://nepalitimes.com/banner/natures-fragile-gift-to-nepal">gifted by nature</a> and rich in <a href="https://archive.nepalitimes.com/article/Nepali-Times-Buzz/ambassador-fund-cultural-preservation-nepal,2092">cultural heritage</a>, &nbsp;reviving rural architecture with modern amenities could hold the key to more <a href="https://nepalitimes.com/here-now/what-sustainable-tourism-means-in-practice">sustainable tourism </a>that benefits local people more. “<a href="https://nepalitimes.com/banner/bayalpata-hospital-in-nepal-wins-global-design-award">Design and architecture</a> are amazing tools to create a unique experience for visitors,” says Spanish architect Tomeu Esteva of Esteva i Esteva Architecture Studio. “Difficult destinations have beautiful hotels with design and comfort.” Esteva was in Kathmandu with his colleagues at an event organised by the Spanish Honorary Consulate at Dwarika’s Hotel last week to showcase buildings which Nepali architects can adapt with local material and design inputs.&nbsp; Rural architecture holds a unique significance: it is more than a shelter and must reflect <a href="https://nepalitimes.com/here-now/inking-an-idenity">local identity, culture</a> and <a href="https://nepalitimes.com/here-now/saving-humla-from-heritage-loss">heritage</a>. An area’s natural and cultural harmony can be upset by <a href="https://nepalitimes.com/here-now/protecting-protected-areas-from-infrastructure?fbclid=IwAR1wK0MDFlFST_2EYb3f54LS4-fPt6rYfLG1DJ1JaQsU3w8-ezyXIxGOqzk">poorly planned development</a>, speakers at the event said, but the environment can be improved and revitalised by well-integrated structures.&nbsp; Another Spanish architect, Belen Moneo, has designed hotels at elevations of 3,700m in her home country Spain that supply natural spring water spas. “<a href="https://nepalitimes.com/banner/lost-in-reconstruction">Creativity in construction</a> must be encouraged. Rural architecture always shows possibilities of what we can do better,” Moneo explains, adding that designs must enhance <a href="https://nepalitimes.com/opinion/the-healing-power-of-nature">the beauty of nature</a> and give a natural feel at a time when steel, glass and cement dominate <a href="https://nepalitimes.com/here-now/rebuilding-kathmandu-after-the-1934-quake">urban design</a>.&nbsp; This is why the <a href="https://nepalitimes.com/here-now/weaving-nature-into-craft">use of natural products</a> such as bamboo, local timber, straw and rammed earth are in demand from customers who want a fresh eco-friendly look encouraged in construction of rural architectural structures. The demand for boutique hotels has increased world over, with &nbsp;more and more tourists favouring aesthetics, experience and comfort over price. While creativity is an important part of <a href="https://nepalitimes.com/here-now/architecture-for-mountains">construction and architecture</a>, incentives to build and use <a href="https://archive.nepalitimes.com/article/nation/Building,370">rural construction materials</a> still remain minimal, and Moneo emphasises the significance of design and execution.&nbsp; Esteva helped design the Vana Retreat in Dehradun that kept the natural environment in focus, with the structure giving an elaborate aesthetic experience to visitors. Another example is Hotel Las Mercedes in the Dominican Republic which was designed and constructed by Moneo and the company she co-founded Moneo Brock, respecting and revaluing the traditional architecture of the area. Hotels providing such experience could attract tourists and revenue. The Spanish ambassador to Nepal Juan Antonio March Pujol said, “The role of architecture and architects in developing tourism is crucial, not only in urban areas but rural settings as well.”&nbsp; The concept of rural boutique hotels gained traction in Spain during the 1990s, particularly in regions like Majorca with economic and environmental sustainability as the main focus. In Nepal <a href="https://nepalitimes.com/opinion/12-full-opinion/guiding-nepal-s-tourism-industry">the tourism industry</a> directly employs about 1 million people, and makes up about 8% of the country’s GDP. In Nepal, the stone homes of <a href="https://nepalitimes.com/news/reviving-himalayan-vulture-and-culture">Mustang and Manang</a>, bamboo and mud structures of <a href="https://nepalitimes.com/here-now/the-tarai-s-shrinking-forests">the Tarai</a>, and the Kathmandu Valley’s terra cotta tile skylines, graceful temples, and tranquil bahal courtyards are all examples of <a href="https://nepalitimes.com/here-now/nepal-s-traditional-seismic-resistant-designs">Nepal’s traditional architecture</a>.&nbsp; Nepali architect Sarosh Pradhan has been working for the past eight years on the Brakka Village project in Manang Valley north of <a href="https://nepalitimes.com/banner/municipalities-want-to-manage-annapurna">the Annapurnas</a>. Other examples of this kind of rural architecture for high-end tourism are the Shinta Mani Hotel in Mustang and Khumbu Lodge below <a href="https://nepalitimes.com/news/mt-everest-pvt-ltd">Mt Everest</a>. Says Pradhan, “There are places in Nepal that radiate purity and embrace simplicity. Creating projects in such settings require deep reflection and thoughtful planning.”  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250421030444_a07a23f6b60fa89c0f35b9dc1aaf19937da4881e6bfb2e1858f3c27dff91729f.jpg" data-media-id="editor_19" data-image-id="20250421030444_a07a23f6b60fa89c0f35b9dc1aaf19937da4881e6bfb2e1858f3c27dff91729f" data-rendition-name="original" width="4608" height="2184" loading="lazy" alt="A new architecture for Nepal's tourism"> </figure>  Rural architecture is not easy, and sometimes more expensive. Inflation, energy efficiency, <a href="https://nepalitimes.com/here-now/those-who-stay">the climate crisis</a>, and <a href="https://nepalitimes.com/banner/cost-of-living-in-a-big-city">increased costs of living</a> pose obstacles to sustainable rural architecture. Read also: <a href="https://nepalitimes.com/here-now/forgotten-international-starchitects-in-nepal">Forgotten international starchitects in Nepal</a>, Anne Feenstra and Varun S Bapu Esteva says faith and trust between client and architect is necessary for any project to be successful. He adds that architects must practice being humble, the process of designing always involves learning and not imposing their ideas on clients. Nepal is uniquely positioned for the growth of <a href="https://nepalitimes.com/banner/hiking-up-the-benefits-of-tourism">rural tourism</a> because of its stunning countryside as well as its internationally renowned traditions in holistic wellness. Creating infrastructure that is small, thoughtfully planned and that respects both tradition and contemporary hospitality standards is crucial. “Projects in Nepal can be made cost effective by using materials from houses that have been brought down,” says Esteva. “Pilot projects involving <a href="https://nepalitimes.com/banner/local-government-by-the-people-for-the-people-of-the-people">local people </a>and simple designing also helps the process.” <a href="https://nepalitimes.com/banner/vacant-homes-become-homestays-in-nepal">The growth of homestays in Nepal</a> is a step in the right direction, but they are still a bit too rustic for the international traveller who also wants comfort and is willing to pay extra for it. Upgrading the facilities in homestays and ensuring that the <a href="https://nepalitimes.com/here-now/an-archive-of-nepali-heritage">architectural heritage</a> of the locality is preserved using locally sourced building material could allow owners to charge more. Says Sangita Shrestha of Dwarika’s Hotel, “Our effort is to build upon rural architecture by empowering local communities and using what is available locally. We can fine tune and encourage indigenous design and training.” The vision goes beyond just boosting the economy, it is about building a future where tourism helps villages grow in a healthy and lasting way. Instead of using up resources, it gives back to the land and the people. It supports local communities by<a href="https://nepalitimes.com/opinion/staying-in-nepal-to-create-jobs"> creating jobs</a>, improving infrastructure, and protecting natural beauty. When done right, tourism can be a tool for <a href="https://nepalitimes.com/editorial/progress-and-or-preservation">preserving culture and nature</a>, not harming them. Architects must therefore see their work as more than just designing buildings, they also need to care deeply about people and places, especially in rural areas that can benefit the most.&nbsp; With global interest in sustainable and off-the-beaten-path travel increasing, Nepal stands at the cusp of a <a href="https://nepalitimes.com/news/missing-out-on-nepal-s-tourism-potential">tourism transformation</a> that values community-driven, eco-conscious hospitality. A mix of modern ideas and traditional knowledge could transform rural tourism in Nepal. Says Shrestha, “Young architects should spend time with <a href="https://nepalitimes.com/latest/the-unsung-heroes-of-conservation">local and indigenous communities</a>, listen to their stories, and learn from their <a href="https://nepalitimes.com/banner/life-and-livelihood-in-remote-nepal">ways of living</a>. These communities have deep knowledge about the land, materials, and climate. If this wisdom is used in new designs, it can help create tourism spaces that truly benefit everyone.” &nbsp;

A new architecture for Nepal's tourism

Extract from an addendum to Nepal's Two Wars, Chapter 2 in the updated edition of Essays on Nepal: Past and Present by Sam Cowan, a retired British Army general with a long association with the Gurkhas. The book was first published in 2018, and republished earlier this month by FinePrint exclusively on Amazon. The addendum details a one-to-one conversation the author had in the <a href="https://archive.nepalitimes.com/news.php?id=8884">Royal Palace </a>with the <a href="https://archive.nepalitimes.com/news.php?id=8371">King Gyanendra</a> in November 2002 just after he had taken his initial steps on the road that ultimately led to <a href="https://archive.nepalitimes.com/news.php?id=14681">the abolition of the monarchy</a> in Nepal in 2008. In the early evening of September 16, 2002, in my role as Colonel Commandant of the Brigade of Gurkhas, I had my second and last official audience with King Gyanendra to give him an update on the Brigade’s activities over the previous 12 months. I had some 6 or 7 such audiences with <a href="https://nepalitimes.com/here-now/preserving-king-birendra-s-family-home">King Birendra</a>.&nbsp; These were official affairs with the British ambassador of the day present, along with key <a href="https://archive.nepalitimes.com/news.php?id=12233">palace officials</a> and a representative from Nepal's Foreign Ministry. The two monarchs were very different in character and temperament, but both treated me with the utmost civility and made the audiences as relaxed and easy for me as possible.&nbsp; It is, however, worth recording that when the official business had been covered, King Birendra, with a twinkle in his eye, often ended by asking, “Now General, what’s the gossip in London?” The second audience with <a href="https://archive.nepalitimes.com/news.php?id=8026">King Gyanendra </a>was my last official act in uniform. We came back to Kathmandu in the first week of November (after treks) to stay for a few nights with our Defence Attaché before heading back to the UK. Waiting for me was a message from the Palace saying that King Gyanendra would like to meet me informally: <a href="https://archive.nepalitimes.com/news.php?id=6933">no uniform</a> and no ambassador.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250421080420_f9046f9882d4481781d14f2b64f18c7fbbea62562e1d74e3465de6d01fb43750.jpg" data-media-id="editor_7" data-image-id="20250421080420_f9046f9882d4481781d14f2b64f18c7fbbea62562e1d74e3465de6d01fb43750" data-rendition-name="original" width="1750" height="2406" loading="lazy" alt="Gyanendra crowned page 1"> <figcaption>Nepali Times Special Edition of 6-14 June 2001 with enthronement of Gyanendra. </figcaption> </figure>   <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250421080424_21333d6ae21828eb47fe3f849438d215fe2804460d47bb2896ef4aee4e895ad2.jpg" data-media-id="editor_8" data-image-id="20250421080424_21333d6ae21828eb47fe3f849438d215fe2804460d47bb2896ef4aee4e895ad2" data-rendition-name="original" width="1500" height="1857" loading="lazy" alt="Royal massacre"> <figcaption>Nepali Times 22-29 June 2001 covering the royal massacre after which Gyanendra became king. </figcaption> </figure>  Although I had no idea what the purpose of the meeting might be, events in Kathmandu since I last saw the king put me on edge. On October 4, 2002, Gyanendra had dismissed Prime Minister Sher Bahadur Deuba, allegedly for failing to hold <a href="https://nepalitimes.com/news/what-goes-on-in-nepal-s-elections">elections</a>. He had put in place a new prime minister and a cabinet personally selected by him. When I heard the news on my travels, the people I met were generally supportive of the king’s actions. There was a general view that something had to be done, the country was going nowhere, and the king deserved his chance, not least to solve<a href="https://nepalitimes.com/latest/14-years-after-conflict-no-closure-in-nepal"> the Maoist </a>problem. Back in Kathmandu, views were not so sanguine. The chosen prime minister, Lokendra Bahadur Chand, was a relic from <a href="https://nepalitimes.com/here-now/mob-movement-and-mayhem">the Panchayat period</a> whose party had failed to win a single seat in the last elections held in 1999. Some of the chosen cabinet ministers had, to put it mildly, dubious reputations, and others had no record of proven competence in any field. There was a fear that the king’s real motive in dismissing <a href="https://nepalitimes.com/editorial/deubas-denouement">Deuba</a> was to start to reverse the democratic gains made since 1990. I informed <a href="https://nepalitimes.com/news/nepal-britain-mark-centenary-of-1923-treaty">the British ambassador</a> about the invitation. He was strongly against accepting it, which was probably the clinching reason for my decision to do the polite thing and accept it. On the evening of November 7, 2002, I presented myself at the royal palace, alone and in civilian attire.&nbsp; As in the past, the Military Secretary, Major General Vivek Shah, met and escorted me into the presence of the monarch. This time, however, he was politely asked to leave the room and shut the door behind him. King Gyanendra greeted me warmly and invited me to sit down.&nbsp; Read also:<a href="https://nepalitimes.com/news/the-ghost-of-monarchy-returns-to-haunt-nepal"> The ghost of monarchy returns to haunt Nepal</a>, Shristi Karki  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250421080424_e382af945d0ad2a04ae41fabe5393f793dd10f54cb1220f111c7c9e7423eb558.jpg" data-media-id="editor_15" data-image-id="20250421080424_e382af945d0ad2a04ae41fabe5393f793dd10f54cb1220f111c7c9e7423eb558" data-rendition-name="original" width="1000" height="993" loading="lazy" alt="Gyanendra coup"> <figcaption>Nepali Times 4-10 February 2005 after king Gyanendra's coup imposed media censorship. anendra became king. </figcaption> </figure>  I had wondered, and to be truthful, had worried, not just about the purpose of the meeting, but about how the conversation might start and develop. I reduced my resolve to two points: be polite but speak candidly. The latter resolve was quickly put to the test with the king’s opening words: “Sam, [in previous meetings it had been ‘General’, you walk the highways and byways of this land more than most, tell me what the common man is thinking?” &nbsp;“Your Majesty, I have no idea what they are thinking, but they are waiting.” “Waiting?” “Yes, Your Majesty, they are waiting to see whether what you did some weeks ago in appointing your own prime minister and cabinet ministers is going to make any difference to their lives or whether it is just going to be more Kathmandu hot air.” “Everything is going to be difficult and is going to take time, a lot of time.” “Your Majesty, time is the one thing you don’t have. You must act quickly and decisively to take advantage of the opportunity you have created. Everyone knows that you have appointed these new ministers. Why don’t you get them in here one by one and tell them that they have three months to deliver a programme in their area of responsibility that is going to make a difference to people’s lives? Most will fail to do so. Sack them! It will be a powerful signal of your strong intent to deliver real change.” I can express the opening of our conversation in this way because just about every word is still etched in my mind. The king’s response to my last quoted words was to challenge me to give an example of something that could be delivered quickly. I can give a verbatim record of what I said in response to this unexpected challenge: “Health posts, Your Majesty, there is no shortage of them throughout the country as building them has been one of the sources of local corruption, but very few have any medicine to issue at present or have skilled people to assess and meet medical needs. Your Majesty, children are dying for lack of a few pills. Given the right priority, over a period, say of six months, every health post could be fully stocked with medicine and manned with trained people. This is something I could help to lead for you as I know it would have strong international backing. At last, people would know that you mean business.” As I warmed to the theme, I could see no sign of the king having any enthusiasm for the idea, and I quickly disengaged as it dawned on me, as it had clearly dawned on the king, that the reason for the deficiencies in health posts was to prevent any Maoist combatant from gaining access to any <a href="https://nepalitimes.com/opinion/tech-away/nepal-s-health-tech-industry-is-here-to-stay">medical support</a>, and if this meant people suffering, so be it. The subject of the Maoist insurgency inevitably came up, and I took the opportunity to elaborate on what is written in the final four paragraphs of the article above. I advised King Gyanendra that, self-evidently, since there were three parties in the conflict—him, the Maoists, and the political parties—it was imperative that he form an alliance with one of them, preferably the political parties; otherwise, he would find himself isolated, as the other two parties would inevitably, at some stage, form their own alliance. However, it quickly became apparent that the king’s mind was on a totally different track. On the Maoists, he told me that he had channels open to them, but he was scathing about the political party leaders. He made it clear that they would be waiting for a very long time before he gave any power back to them, and that is a polite way of expressing the actual words he used, but “crawling through the door” is a phrase which has stuck in my mind.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250421080424_5403455ff6168f0d202a96cb53edea69136d74d59b989cfcc7cc4a1d57672cb5.jpg" data-media-id="editor_17" data-image-id="20250421080424_5403455ff6168f0d202a96cb53edea69136d74d59b989cfcc7cc4a1d57672cb5" data-rendition-name="original" width="2000" height="1317" loading="lazy" alt="fall of monarchy"> <figcaption>Nepali Times 28 April-3 May 2005 with cover image by Ajay Joshi of jubilant protesters after street demonstrations sidelined king Gyanendra, paving the way for a ceasfire and restoration of democracy. </figcaption> </figure>  As the conversation developed, it became ever clearer that King Gyanendra had decided to go in alone, relying on the misleading assurances he was constantly receiving from <a href="https://archive.nepalitimes.com/news.php?id=14954">the army</a>, and no doubt his close advisers, that the Maoists could and would be quickly defeated militarily, and taken out of the equation. This would obviate the need for him to do any deal with the political parties.&nbsp; Thus, the way would be clear for him to establish a version of his father’s Panchayat system, under a constitution that would be granted to the people by him, their sovereign, as his father and brother had done in 1962 and 1990. As in those constitutions, ultimate power would have remained in the sovereign’s hands. This proposed direction of travel was very clear from what the king said to me. In sum, King Gyanendra was motivated by a desire to emulate his immediate predecessors by granting his people a constitution that would restore his father’s Panchayat system in a modern form and give him a central role in decision-making. What was particularly dispiriting was that beyond this single objective he had no plan worthy of the name, nor demonstrably did he have the people with the skills to implement an appropriate plan even if one had existed. Crucially and depressingly, there was little or no indication from the king that he realised that such a course of action could put Nepal’s monarchy into serious jeopardy, as indeed proved to be the case. <h2>King Twice</h2>  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250420110436_315d519fe3d68d2406ebe1480fed54720fbf21b8907a4da5cde751fdc623d445.jpg" data-media-id="editor_19" data-image-id="20250420110436_315d519fe3d68d2406ebe1480fed54720fbf21b8907a4da5cde751fdc623d445" data-rendition-name="original" width="1302" height="632" loading="lazy" alt="“Tell me what the common man is thinking!”"> </figure>  <a href="https://archive.nepalitimes.com/news.php?id=8371">Gyanendra Bir Bikram Shah has been king twice</a>. In 1950 he was enthroned briefly as a child king (left, above) by the Rana Prime Minister Mohan Shumsher when his grandfather, King Tribhuvan, fled to exile in India. In 2001 he was crowned king again after the massacre in the royal palace in which his brother King Birendra and nine other members of his family were killed by Crown Prince Dipendra.&nbsp; During his second reign, Gyanendra gradually asserted power by sacking Prime Minister Sher Bahadur Deuba in 2002, and then taking full control after the 1 February 2005 coup. He was sidelined after the ceasefire in April 2006, and became a commoner after the Constituent Assembly finally <a href="https://archive.nepalitimes.com/article/from-nepali-press/Ftnp-abolishing,624">abolished the monarchy in 2008</a>. In the past year, Gyanendra has tried to exploit public dissatisfaction with the political parties to restore the monarchy.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250421080432_26ef4a4b0e3cee9fdc6794446702efe16550d293904b4f6dd46fe35d4d10c788.jpg" data-media-id="editor_22" data-image-id="20250421080432_26ef4a4b0e3cee9fdc6794446702efe16550d293904b4f6dd46fe35d4d10c788" data-rendition-name="original" width="1136" height="702" loading="lazy" alt="Essays on Nepal by Sam Cowen"> </figure>

“Tell me what the common man is thinking!”

“It's Kathmandu.” Just as the family was sitting down for one of its extended lunches, that jubilant cry was from François Driard’s grandfather announcing the next posting for his diplomat parents.&nbsp; Driard (pictured) was 18 in the summer of 1996,<a href="https://nepalitimes.com/opinion/suburban-tales/chasing-a-nomad"> a bit of a hippie</a> already, and his life was about to change forever with the magical word “<a href="https://nepalitimes.com/banner/time-capsule-of-kathmandu">Kathmandu</a>”. “I was awed with that information from my grandfather, nothing else mattered … In France <a href="https://nepalitimes.com/here-now/tales-of-courage-and-suffering-cx95f89e">in the 1990s</a>, Kathmandu had a mythical aura,” Driard recalls. He came to Kathmandu for Christmas that year to visit his stepfather, the French Ambassador Michel Lummaux. It was to be the first of many visits during school holidays, before he decided to permanently settle down in Nepal. “Kathmandu, and Nepal, were very different then, it was magical, I liked the nature, the people, civilisation, temples, trees,” says Driard, who explored the country sitting on the top of buses. “Visitors talk about the crazy <a href="https://nepalitimes.com/banner/cost-of-living-in-a-big-city">urbanisation</a>, traffic jams today, and all that is true. But Kathmandu has not <a href="https://nepalitimes.com/here-now/loss-of-soul-and-soil">lost its soul</a>.” After his stepfather’s tenure in Nepal ended, Driard worked as a business reporter for international publications but decided he did not want to be anyone’s employee anymore. In 2007 he landed in Kathmandu with €20,000 in savings to invest.&nbsp; He knew a few crucial things about himself: he liked food and nature, which is very much tied up with his upbringing--full of lively conversations during lunch and dinner at the family table between <a href="https://nepalitimes.com/here-now/nepals-yak-cheese-is-on-world-map">abundant cheese, wine and cigars</a>. So he decided it would be cheese, and registered Himalayan French Cheese and went to the French Alps for a month to learn how to make Tomme de Savoie. “<a href="https://nepalitimes.com/banner/the-story-of-langtang-cheese">Cheese making is such an ancient craft </a>and so I thought I won’t need much money or studying which I hated and indeed, if you have a tamako bhado and fire you are set,” explains Driard. But Nepal’s temperature and humidity were not ideal, even at higher altitudes. The first customers for his cheese were the Hyatt Regency and Nina and Hager. But he needed to create a market for cheese in a country which only knew hard churpi in the north and soft paneer in the south. He started selling his cheeses at the Summit Hotel weekend market, expanding to his own 1905 Farmer’s Market which later moved to Le Sherpa in Maharajganj, where it is now, and also a market at Labim Mall in Pulchok. He had cow dairies in Nuwakot and Dhulikhel, and finally a yak cheese unit at 3,379m in Ramechhap. It was the yak blue cheese from here that went on to win a Gold Medal in France, putting Nepal’s French cheese on the world map. “People come and try our cheese at the market, they ask questions. There is a lot of education to be done about cheese,” adds Driard, who also has three cheese shops in the Valley. Driard now makes 25 types of cheese. The products are being noticed and every year he has French students coming to Nepal to learn the art of yak cheese making. “In France, one family or company makes one kind of cheese for generations. In that I’m very unique as a cheese artisan,” he says. “The students come in to learn but I tell them to also teach us something too, add another cheese to my collection.” Read also: <a href="https://nepalitimes.com/here-now/langtang-after-10-years">Langtang after 10 years</a>, Sonia Awale Being a foodie, Driard is now also dabbling in meat with his own charcuterie at Meatini with bacon, ham, sausage and pâtés. All of this is now served at his Emilio’s Pizza, a leafy hideaway in Lazimpat. His South Side in Moksh is probably the smallest wine bar in the world. “I call the process sublime,” says Driard of his ventures, which have grown organically. “You need the same temperature and humidity of 12°C and 80% for cheese, meat and wine.” Emilio’s speciality is the eight-cheese pizza (which has eight types of cheeses), and a pizza with bhutan topping (not the country but fried intestines and organs Nepali-style). He has opened a small branch at Courtyard in Pokhara.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250426070456_bacae302c040dc18eeecdeafda72ddf06a6d2cec138ea9be7e45fe94cdf8b5b3.jpg" data-media-id="editor_8" data-image-id="20250426070456_bacae302c040dc18eeecdeafda72ddf06a6d2cec138ea9be7e45fe94cdf8b5b3" data-rendition-name="original" width="1500" height="1125" loading="lazy" alt="8 cheese pizza"> <figcaption>Eight-cheese pizza</figcaption> </figure>  With two artisanal cheese units, two farmers’ markets, a <a href="https://nepalitimes.com/here-now/the-meat-of-the-story">meat processing unit</a>, a bakery, and wine bar he now envisions a vineyard so he can add Nepali wine to his repertoire. Another future plan is to start up an agri-tourism business where customers can drink, eat and work in peace. In the past 20 years in Nepal, Driard has not always succeeded in his ventures but this hasn’t curbed his enthusiasm. He is learning as he goes, and like an old wine, Nepal is growing on him. Its slowness suits his French art de vivre with eating slowly outdoors, having conversation, importing less.&nbsp; “I have proven that with even a little money you can do a lot of things in Nepal,” adds Driard. “In the West, they easily invest half a million euros on a cheese factory, I invested 10 times less.”&nbsp;

Fromage, vin et charcuterie Népalais

Bhuthan भुठान starts with Bishnu Bahadur KC played by <a href="https://archive.nepalitimes.com/article/Nepali-Times-Buzz/dhuwa-smoke-telefilm,2671">Hari Bansha Acharya</a> on a call, requesting to speak to the visa officer. By this point, he had <a href="https://nepalitimes.com/here-now/nepal-should-now-allow-visa-on-arrival">applied for a visa </a>to Bhutan 10 times, but was denied each time. KC was a <a href="https://nepalitimes.com/here-now/nepal-s-women-excel-in-sports-in-2024-z9ramyct">national football player </a>in Bhutan in 1988 before he and other Nepali-speaking Lhotsampa people were forced out of the country in the 1990s as part of the Druk regime’s ‘One Nation One People’ campaign. Over 100,000 Bhutanese Nepalis were forced out, driven across India and dumped in Nepal where they lived in seven<a href="https://nepalitimes.com/here-now/elderly-left-in-bhutan-refugee-camp"> refugee camps</a> supervised by the United Nations and other charities until they were resettled in the United States, Australia, New Zealand and some European countries starting in 2007. In the fictional movie with the satirical English title The World’s Happiest Man, KC has resettled in the state of Ohio in the US but wishes to visit his home country once before he dies. Between flashbacks, we learn KC has died without having fulfilled his wish. &nbsp; The drama then focuses on KC’s two families from two marriages as they debate whether to cremate him as per <a href="https://archive.nepalitimes.com/article/from-nepali-press/muslim-hindu,2996">Hindu rites </a>or give him a Christian burial. A mediator played by Hollywood actor Bruce Dern urges them to take a firm decision before it is too long.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250430140420_b398a08091b866da2b0b8f6c1e6e26781609749aba896bfd2c68a10a519295c3.jpg" data-media-id="editor_5" data-image-id="20250430140420_b398a08091b866da2b0b8f6c1e6e26781609749aba896bfd2c68a10a519295c3" data-rendition-name="original" width="945" height="945" loading="lazy" alt="Bhutan, the movie"> </figure>  There are drawn out scenes of KC being baptised and when he is confronted by his first wife from Darjeeling played by Anuradha Majumdar, he says he changed his religion in the hope that he will be <a href="https://nepalitimes.com/opinion/comment/bhutan-s-refugees-between-hope-and-despair">allowed back in Bhutan</a>.&nbsp; We find out KC has a second wife, a Christian Nepali played by Puja Chand. Dayahang Rai as the younger son doesn’t have much screen time to flex his acting chops. &nbsp; Acharya competently portrays a man that is equal parts haunted by the memories of and longing for his home country. KC’s pain and loss is acute when he is teaching football to Gungun but between mid-scene, he freezes, perhaps lost in memories of being in Bhutan’s national team. &nbsp; In another scene, KC recalls his mother singing a lullaby in Dzongkha. He also has a box filled with medals, photographs and a football which he deflates with a knife in a powerful depiction of his <a href="https://nepalitimes.com/here-now/searching-for-a-homeland-away-from-home?fb_comment_id=1506516030025634">complicated emotions about his homeland</a>. KC keeps checking his mailbox in the hopes that his <a href="https://archive.nepalitimes.com/news.php?id=4977">visa application</a> has been accepted. He says in Nepali: “If a tree that has already struck roots in one place is shifted to another, it will not survive.”  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250430140420_4a9c27410326489576c04dedf40016bda3825e8f9663317f54fbfec4cbda6d34.jpg" data-media-id="editor_9" data-image-id="20250430140420_4a9c27410326489576c04dedf40016bda3825e8f9663317f54fbfec4cbda6d34" data-rendition-name="original" width="1422" height="2048" loading="lazy" alt="Bhutan, the movie"> </figure>  Dern’s character says that the <a href="https://nepalitimes.com/opinion/comment/nepal-s-transitional-justice-and-the-west-s-recalibration">western world</a> has become “lonely in pursuit of happiness”, another reference to Bhutan’s obsession with its Gross National Happiness index. Scenes shift quickly throughout making the story difficult to follow at times. The use of symbolism is a trite overdone. Nonetheless, भुठान is a nuanced depiction of raw pain and agony of losing one’s homeland. But one cannot help but leave the theatre feeling deflated. KC dies without having visited <a href="https://nepalitimes.com/here-now/small-bhutan-dreams-big">Bhutan</a>, but perhaps he does in his afterlife. It is up to the audience to create its own ending to this sad story of exile. भुठान Mad Monkey Films, 2025 Directed by Binod Paudel 102 minutes In cinemas in Nepal

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